Aerospike rocket engines are not really new; the concept has been around for decades, the groundwork having been laid down by Boeing’s Rocketdyne Power and Propulsion Unit in the late 60s and early 70s, when a number of prototypes were test-fired. Advanced aerospike engines were extensively developed and test-fired all the way up through 2000 as part of NASA’s X-33/VentureStar program.

The following description is taken almost verbatim from the official NASA linear aerospike engine newspage, which unfortunately has been taken down since this article was first posted.

"Unlike conventional rocket engines, which feature a bell nozzle that constricts expanding gasses, the basic aerospike shape is that of a bell turned inside out and upside down (much like an ice cream cone with a rounded "point"-P.L.) When the reconfigured bell is "unwrapped" and laid flat, it is called a linear aerospike.

"The linear aerospike features a series of small combustion chambers along the unwrapped bell, also called the ramp, that shoot hot gases along the ramp’s outside surface to produce thrust along the length of the ramp, hence the name ‘linear aerospike.’

"With the aerospike, the ramp serves as the inner wall of the virtual bell nozzle, while atmospheric pressure serves as the "invisible" outer wall. The combustion gasses race along the inner wall (the ramp) and the outer wall (atmospheric pressure) to produce thrust.

"The key to a conventional bell nozzle's level of performance is its width. At high pressure -- i.e. sea level -- the gasses are more tightly focused, so a bell nozzle with a narrow interior surface works best. At low pressure -- i.e. higher altitudes -- a wider interior works best as the gasses will expand farther.

"For example, the initial stage of the Saturn rocket which carried the Apollo astronauts to the Moon featured a narrow nozzle to produce an ideal straight-edged column of exhaust at sea level. However, the command module which orbited the Moon featured a much wider bell nozzle better suited for controlling the combustion gasses in the vacuum of space.

"Since the width of the bell nozzles can’t change to match the atmospheric pressure as the rocket climbs, bell nozzles are normally designed to provide optimum performance at one certain altitude or pressure. This is called a "point design," and engineers accept the performance loss the nozzle will encounter at any altitude other than the one it was designed for.

"The aerospike eliminates this loss of performance. Since the combustion gasses only are constrained on one side by a fixed surface -- the ramp -- and constrained on the other side by atmospheric pressure, the aerospike's plume can widen with the decreasing atmospheric pressure as the vehicle climbs, thus maintaining more efficient thrust throughout the vehicle's flight."

To sum up, the aerospike engine exhaust point has a conical projection in the center and no outer nozzle. This conical projection, or "ramp," helps to shape the exhaust. In the lower atmosphere, the high air pressure around the ramp constricts the exhaust flow into a relatively tight column. At higher altitudes, as the air pressure thins out, the rocket exhaust spreads outward from the ramp. This arrangement allows for steady engine efficiency and performance at all altitudes.

The ramp does not have to taper all the way to a point. Many aerospike rocket designs have used a truncated ramp--where the conical projection is seemingly cut short and rounded. The remainder of the "spike" is formed by waste gas exhaust released from the ramp plane. The pressure exerted by this gas exhaust serves as a "virtual" ramp face, helping to mold the flow of the rocket exhaust just like a physical ramp. NASA'a mid-80s PHOENIX SSTO project postulated using a ramp that looked like little more than a rounded bump. The exhaust of waste gasses forced out from the center of this "bump" formed a pressure "spike" that functioned exactly like a physical ramp.

Because of their aerospike design, the engines developed for the X-33 program were 75% shorter compared to conventional rocket engines of comparable output. This means less engine weight and less engine support structure required, allowing for a lighter vehicle and lower launch costs than conventional rockets.